November 27, 2022

Investing in the Blockchain Boom: Is It a Good Idea?

Blockchain technology and distributed ledger systems are two of the most popular trends in business today. They were introduced to the mainstream following the rise in popularity of cryptocurrencies, which has created new investment vehicles and opportunities. Additionally, new businesses models that use these advancements are emerging that improve workflows, data security, e-commerce processes, government processes, and more.

A distributed ledger, also known as a blockchain, is a digital spreadsheet or ledger in which every transaction is recorded. It verifies, validates, and archives data while also allowing it to be viewed virtually in real time by all participants. Blockchain builds on the concept of a distributed ledger but adds wider public access and security.

There are several subcategories within each category, and it’s important to understand the distinctions between them so that you can make an informed investment. In general, cryptocurrencies, as well as businesses developing and implementing new products that use blockchain or distributed ledger technology, are two major areas in which investors may put their money. A blockchain is a decentralized ledger, but a distributed ledger is not necessarily a blockchain.

Blockchain technology is a type of distributed ledger technology (DLT) that focuses on cryptocurrency and the ecosystems that have grown from it. Blockchain uses encryption and verification methods to restrict access to an append-only structure, where new data can be entered but existing data cannot be changed.

There are endless potential applications for blockchain technology, from tokenizing pixel art to powering fantasy football leagues to creating digital worlds where you can buy virtual real estate.

Data in a ledger can be easily shared and verified for accuracy with DLT. This technology is being used by an ever-growing number of industries, including supply chains, accounting, financial services, warehousing, shipping, and more.

The good news is that there are a plethora of options for investing in blockchain and distributed ledger technology, giving you the chance to take advantage of the potential. The way you invest in blockchain technology will be largely determined by your level of risk appetite and your passions.

 

There are a plethora of blockchain-related start-ups you may invest in. Many well-known businesses, such as IBM and Nvidia, are working on blockchain applications. In addition, there are many more public and private markets to explore. There are various marketplaces from which you can choose:

  • Decentralized Finance
  • Financial Technology
  • Metaverse
  • Exchanges

Blockchain has allowed for the decentralization and tokenization of almost everything that has worth, allowing a business to raise money by developing digital investment instruments similar to non-fungible tokens. In this case, tokenization is the transfer of ownership or interest from a physical asset to a token, which is a digital representation of that ownership linked on the blockchain.

 

By using digital securities that are backed by smart contracts, you can cut out the middleman (i.e., broker) and trade directly with another party. These agreements are managed by programs that execute once both parties have agreed to the terms, providing a layer of safety for investors.

You can find digital securities evolving in sectors such as:

  • Venture capital
  • Real estate
  • Private equity
  • Hedge funds

The primary advantage of digital securities is that they can be fractionalized to a much greater degree than traditional ones. This fractionalization also opens up markets to which you may not have previously been able to gain access due to the amount of money required to get in.

Non-fungible tokens (NFTs) are digital assets that have been tokenized. They had previously existed, but the media’s attention in 2021 popularized them in the public eye after the digital artist Beeple sold a collage of non-fungible tokens for $69 million. An NFT can be any digital commodity, such as apparel, art, music, movies, video games, or anything else that may be tokenized.